It began as a Prenda Law case usually begins: using questionable "forensics" to identify someone to target, first with threatening letters and then a lawsuit if they didn’t pay up. In this case, when Joe Navasca’s father didn’t capitulate, Prenda Law targeted the son instead. (Note: I’m including his name because it is now in the public record. And also to commend Mr. Navasca for standing up to these bullies.) Unfortunately for Prenda Law, the wheels of justice grind slowly, and some of its previous cases were starting to catch up with it just as this one began to lurch forward.

The default rule in American litigation is that everyone pays for their own lawyers. But some laws, the Copyright Act being one of them, have provisions so that the loser pays for both sides' lawyers. Fully denying all of Prenda Law’s allegations of infringement, and now aware of the allegations of malfeasance directed at the Prenda Law enterprise, Mr. Navasca reasonably expected Prenda Law to eventually lose the case it had brought against him and need to reimburse him for his attorney fees. But just because a judge may grant an award of attorney fees doesn't mean the money will ever be recovered; enforcing a judgment often presents its own expensive challenges, meaning a wronged defendant can still be saddled with the costs of his own defense. However the California Code of Civil Procedure has a provision, § 1030, to help mitigate that financial risk by allowing defendants in similar positions as Mr. Navasca to require plaintiffs to make an "undertaking;" that is, to post a bond that would guarantee, when the defendant inevitably wins his fees, that he would actually get the money. Citing that provision Mr. Navasca moved the court to require Prenda Law to make this undertaking. Naturally Prenda Law opposed this requirement in a filing I will leave to others to snark about that in order to continue the story.

The day after rejecting the attempt to expedite discovery the court granted Mr. Navasca’s motion requiring Prenda Law to provide the undertaking, but agreed to stay the ruling (meaning, postpone whether it should be put into effect) in order to give Prenda Law a chance to move for the court to reconsider it, which it does not appear to have ever done. At this point Prenda Law decided that discovery was actually all happening way too fast and so moved to stay it (basically, to put it on pause) while the undertaking issue continued to pend. Mr. Navasca’s response to this motion basically boiled down to, "While we don’t necessarily have a problem with staying discovery generally, we do find it suspicious that you want to stay it right before we get to do our 30(b)(6) deposition of AF Holdings." The court denied Prenda Law’s motion to stay the discovery and the 30(b)(6) deposition of Paul Hansemeier went forward.

Not so fast, responded Navasca’s attorneys, Nick Ranallo and Morgan Pietz, in a brief whose table of contents alone is eviscerating. You can’t just dump an expensive, unmeritorious lawsuit on an innocent defendant, certainly not by committing fraud on the court, and then simply walk away from it. You are at least going to need to pay us the fees we had to expend defending against it.

Paul Duffy's rocks and hard places

Paul Duffy has a problem. He's counsel of record for AF Holdings, to the extent that AF Holdings even is a client separate and distinct from Prenda Law. But in between the time he filed the motion for voluntary dismissal and now, the April 2 hearing in Los Angeles happened where he (among other Prenda Law people) plead the Fifth Amendment in refusing to answer questions about AF Holdings. This act put him in a bind: if he opened up his mouth in San Francisco to talk about AF Holdings it could inculpate him in its affairs. You can't assert the Fifth Amendment in some contexts and waive it in others, that's not the way it works. Anything he says about AF Holdings in some proceedings can and will be used against him in others.

On the other hand, as counsel to a purportedly separate and distinct client, he can't just blow off the hearing, even if that might be the best option for saving his own skin. AF Holdings, whoever it is, is staring down the barrel of a judgment on the order of tens of thousands of dollars against it. If it were truly a separate client it should be able to count on him to try to prevent such a judgment. Note: this doesn't mean the client could expect him to prevail, but it could expect him to at least give it the ol' college try. That meant that he couldn't just not show up (which apparently was what he did — or, er, didn't do — at a hearing yesterday in Illinois). He couldn't just withdraw as counsel, either, because that generally requires the court's permission once a lawsuit is underway in order to make sure a client isn't being left high and dry (see, for example, the earlier motion to substitute Duffy for Gibbs, which they needed the court to approve). Nor could he choose to just not argue, or purposefully argue badly, without abrogating his ethical duties to the client. But it was unclear what he could argue that wouldn't further implicate him in the misdealings of the Prenda Law enterprise.

The ol' college try

The above sets the stage for today's hearing, which was the third matter on Judge Chen's afternoon calendar. I've never appeared before Judge Chen, but I've now observed quite a few of his hearings (not just today, but also when I waited to serve Charles Carreon…). His demeanor is not terrifying; for the well-behaved attorneys appearing before him he seems to play a role almost like a mediator, efficiently absorbing facts, managing case logistics, and isolating areas of contention. For the less well-behaved his countenance appears to remain much the same, as he allows both sides ample time and opportunity to present all facts and arguments for his consideration. But should his calm patience ever delude counsel into taking him for a fool, a stinging pointed question, albeit very calmly made, will serve as notification of their error.

Duffy did, in fact, appear in person, despite his absence yesterday. Unfortunately he mumbled so much that even though I was in the front row of the gallery I didn't catch everything he said. The court reporter was much closer and presumably caught all of his equivocation, but there did seem to be an awful lot he didn't know. Which was particularly notable when confronted with questions about AF Holdings. "I have no personal knowledge," Duffy said in response to one such question, prompting Judge Chen to ask, "Well, what do you know?" and Mr. Ranallo to observe that, "There's been a pattern of no one knowing anything when the time comes" for them to give answers.

Duffy did, however, continue the pretense of being separate, disinterested counsel for this mysterious AF Holdings entity, despite all evidence of it, and him, being rolled up in the Prenda Law enterprise. And for what it's worth, his personal behavior was never really at issue today. The issue, as Judge Chen announced at the top of the proceeding, was whether the dismissal should be granted, and if so, whether it should be with prejudice (meaning AF Holdings would have essentially surrendered on the merits and could never refile this lawsuit ever again), and whether any attorney fees should be awarded to compensate the defendant for having been put through it.

(Actually, even before that Judge Chen began the proceeding with the more ominous, "I asked you to come here today in light of all the things that have happened.")

Why are you asking for this case to be dismissed, he first asked Duffy. There's two reasons, Duffy responded, one being that the $50,000 undertaking was too expensive. He argued the same in his reply to the opposition to dismiss the Navasca case, which basically whined that Prenda Law should not have to be burdened with needing to round up $50,000 in order to pursue a copyright case against a single infringer. Never mind that the court had previously been unimpressed by Prenda Law’s earlier pleas of poverty, the reality is that litigation is expensive. It’s expensive even for truly-wronged plaintiffs, who often can’t afford to sue to vindicate legitimate injuries, and it’s certainly expensive for innocent defendants. In the "Joys of Yiddish" Leo Rosten illustrated "chutzpah" as someone who has killed his parents asking the court for mercy because he’s an orphan. Were Mr. Rosten alive today I think he might update his book with Prenda Law's brief.

The other reason, he said, was that there was a problem of evidence spoliation, which I referred to briefly above. The defendant had been running a piece of software called CCleaner on his computer, and Duffy complained that it destroyed the evidence it needed to be able to prosecute the infringement claim.

At first blush, these complaints may sound quite reasonable (although, as Mr. Ranallo noted, neither had been raised in Prenda Law's initial motion to dismiss). But they are worth further scrutiny. For one thing, CCleaner had been running on the defendant's machine for more than a year before the lawsuit had been filed, a fact that alone deflects claims of spoliation. Secondly, its operation has no effect on the sorts of evidence Prenda Law might want to collect. Although the question of spoliation hadn't been fully adjudicated earlier because Prenda Law's complaints had been couched in a premature motion to compel, the magistrate ruling on the motion had looked into the issue and indicated the concerns appeared unfounded (note the exhibits to the filings linked above). In any case, as Judge Chen honed in on later in the hearing, usually a plaintiff is happy for there to be spoliation problems. "Normally if you argue spoliation, you win the case!" It seemed very strange, he observed, to give up because you are claiming spoliation (and, he asked later, if it really were such a problem, why did you wait to withdraw the case and not do so as soon as you learned of it?). In response Duffy fell back on the, "well, at $50,000 it was too expensive to continue the case" argument. But bear in mind, it's just a $50,000 undertaking, not a $50,000 forfeit. You get it back if you win.

But Prenda Law may have realized it wasn't going to win, and Judge Chen pointedly asked about that. "Why is this attempt to dismiss not simply an attempt to avoid adverse rulings?"

And that was the crux of the hearing as it in some ways went around and around in circles, with Duffy either arguing "it was too expensive to continue!" or "spoliation!" whenever he was losing ground on one or the other, trying to make it seem perfectly innocent to be dropping the case now and avoid all consequences for having pursued it. But Judge Chen did also seem curious about the ownership issues. Who is Salt Marsh, he asked at one point. Mr. Ranallo responded with a reference to the April 2 hearing when Mr. Duffy and others took the Fifth. "That tells us a lot about why this case is ending now." (To which Duffy protested, "This is a civil matter, that was a criminal one. You can't make inferences.") [Ken's note: Ars Technica heard some comments about Salt Marsh as well.]

Judge Chen's questions then turned to fees. Citing a case whose name I didn't fully catch but I think is this, he asked Mr. Ranallo about what portion of his claimed fees applied solely to defending this case and what could be leveraged in other cases. "There will be no subsequent suits," he answered. "Standing is blown." ("That's pure speculation as to the intent of the plaintiff," countered Duffy.)

Mr. Ranallo continued. Nearly all AF Holdings case have been dismissed in the same two weeks, even cases that had no undertaking requirement, and even a case where it had already won a default judgment. (Totally innocent, Duffy explained. It's simply because Gibbs had decided to quit.) The few cases that remain active are the Magsumbol case, where a voluntary dismissal had been denied, and the Trinh case, also in San Francisco, where a $40,000 undertaking had been required, but because Prenda Law hadn't posted it, the case got dismissed with prejudice, thereby making it the losing party and vulnerable to a fee order under the Copyright Act. The nightmare, and potentially very expensive, situation for Prenda Law is that either outcome happens here.

Ultimately, Judge Chen took the matter under submission — meaning that he could rule at any time.

Final thoughts

In one sense it was somewhat disappointing that there was no Perry Mason moment, but as Ken has noted those moments rarely happen. The devil is in the little details and their implications as they are slowly revealed. The wheels of justice grind slowly, it's true, but as we continue to see, they do grind forward.

I would have agreed with you earlier – in fact I did in email. But I think Cathy sets forth reasons why, at least arguably, he had to speak in this case.

And possibly he could have done so without fear of Judge Wright on the spoliation and bond issues, as neither was anywhere near within the scope of his inquiry. The problem is with the AF Holdings ownership issue.

I'm conflicted on this, but having read Cathy's piece (very nice, Cathy!) I'm no as sure as I was from the early partial report I had gotten.

Over at Ars and in a Kurt Opsahl tweet, it is said that Duffy claimed "Salt Marsh", who signed a document saying it had "read", "discussed", and "considered" legal options and rules, is a trust. How can a trust read, discuss, or consider anything. From my non-lawyer perspective, this seems as damning as the Alan Cooper allegations. Any lawyers want to comment? The document is:

Hmmm. If a lawyer taking the Fifth (somehow) meant that s/he couldn't represent a (truly independent) client effectively, would the court be required to grant the lawyer a withdrawal as counsel, or would the lawyer be required to waive their Fifth amendment rights?

On a different matter, isn't it weird that they'd name a trust after the boyfriend of one of the principals sisters?

Ranallo is seeking to make Prenda pay in more than one case now. Another case in which he's asking for attorney's fees has a San Francisco hearing coming up on May 10.

So even if we now have a while to wait for a ruling here, or even if Judge Wright feels he needs more time to cross his eyes and dot his tease, at least we'll continue to be fed more of these shenanigans while we wait impatiently…

To those who don't follow all the subtle details of this soap opera: Anthony (Tony) Saltmarsh is a real person (not a non-charity trust with undefined beneficiaries); he is (was?) a boyfriend of John Steele's sister, Jayme.

Over at Ars and in a Kurt Opsahl tweet, it is said that Duffy claimed "Salt Marsh", who signed a document saying it had "read", "discussed", and "considered" legal options and rules, is a trust. How can a trust read, discuss, or consider anything. From my non-lawyer perspective, this seems as damning as the Alan Cooper allegations.

Maybe Saltmarsh the boyfriend is the trustee of Salt Marsh the trust? Now that would be confusing.

As a Red Dwarf Fan, I keep waiting for one of the Prenda Elite to run out of things to say, blot their hand with ink, stamp a paper with their handprint, state "I am a Fish", spin around thrice and faint. They seem to be getting closer to it..

To those who don't follow all the subtle details of this soap opera: Anthony (Tony) Saltmarsh is a real person (not a non-charity trust with undefined beneficiaries); he is (was?) John Steele's sister Jayme's boyfriend.

Another fine article by the Popehat Team. I find each days revelations more fascinating than the day before. I am most intrigued by the Duffy plot-line for a number of reasons. I gather that he was at one time a legitimate and established attorney at one point and at some point made the decision to go to the dark side. Also, while JS and PH seem to pull the stings, Duffy is the name on Prenda and therefore, his signature invariably shows up on some document in every case.

So, based on the fact that he's drowning in lies at the moment why does he still have so many active cases? Why has he not pulled all of his Discovery subpoena's in his other cases? Why has he not had his minions stop calling Does? Why is he still accepting settlements? Every time I check in with FCT, more people are getting calls and paying settlements to Prenda.

Do Judges have any power to look into settlements paid before Discovery is released for cases that they later deem bunk?

I get the feeling that they are sitting back just laughing this off, waiting for it to end. $10,000 sanctions are a pittance, recoverable with two or three settlements. The big money is well hid and untouchable in Nevis, and if they lose the ability to practice in two states, they still have forty eight others to choose from. Prenda dissolves, the primaries laugh off there wrist slap, start over with new shelf companies, new Alan Coopers, and a new name for the law firm, and have learned from this to be better about staying behind the curtain.

Been following the Prenda saga with interest. Met Ken in Judge Wright's court and watched Gibbs testify. Enjoying Popehat too. Nice writing Cathy!
On a troll-related note, I was recently made happy by Judge Wright's award of attorney's fees to my clients as the prevailing party in a trademark troll case where the plaintiff, Slep-tone Entertainment Corp., purportedly concerned about piracy of its karaoke material, has overinclusively managed to sue many dozens of defendants (karaoke jockeys and venues) across the country. In his order, he stated that Slep-tone's lawsuit was "nothing more than a shakedown," Slep-tone was vexatious, its conduct in bad faith and amounted to taking "trolling to the next level." A blow-by-blow account can be found on the blog of Las Vegas lawyer, Robert Kossack. http://soundchoicelasvegaslawsuit.com/los-angeles-court-orders-slep-tone-to-pay-suganos-attorneys-fees-by-a-date-certain/

'[pleading the 5th] To which Duffy protested, "This is a civil matter, that was a criminal one. You can't make inferences."'

In earlier posts, I thought it was said that in civil matters one could make inferences from a 5th pleading (and cannot in criminal ones). Without admitting that the LA hearing was criminal, even if it was cannot a different civil case make inferences about what was said there? Cathy's post mentions that you can't plead and not-plead the 5th in different contexts about the same matter.

I guess I'm too new to practicing in California, but how is it that Section 1030 can apply to a lawsuit brought under the Copyright Act? I understand a state law claim for personal injury or whatever, but I don't see how state law can require a bond to be posted in order to proceed with a federal claim.

Pleading the 5th. Who declares a case criminal or civil? It wasn't a criminal case to begin with, but Prenda seems to have declared it criminal for the purpose of pleading the 5th. Wouldn't a judge need to agree with them first before they start telling people it is criminal? Has Judge Wright changed it to criminal? Does mentioning criminal behavior automatically move the distinction?

Lucy, all testimony in a civil case is sworn, and can therefore be used in a subsequent criminal action.

For instance, I'm called to take the stand as a defendant in a personal injury case. I testify that I had the green light. The plaintiff's attorney, in an attempt to discredit me, asks whether I've ever committed a crime (an improper question but let's assume my attorney fails to object).

I respond, "No, I killed Jimmy Hoffa, but they've never caught me, the stupid bumblers. I committed the perfect murder!"

Now I'm in some serious trouble. It was a civil case, but I'm potentially looking at a murder charge, based on my sworn testimony that I killed Jimmy Hoffa.

It's always the witness's choice as to whether to assert the privilege against self-incrimination, regardless of the nature of the case in which he or she is called to testify.

@Charlie
Federal courts tend to follow the rules of the forum state with respect to awarding costs and security–the relevant authority is laid out in the opening to the motion for the undertaking.

@Lucy
The case doesn't have to be criminal in order to invoke the 5th, there only needs to be a reasonable belief that your answers might bring criminal action. For example, if the OJ Simpson civil case had happened before the criminal murder trial, OJ could have taken the 5th in the civil case.

However, the criminal vs. civil case distinction matters with respect to whether the court may draw adverse inferences from the invocation of the 5th. Prenda is saying that the LA case has effectively become criminal, because Judge Wright was talking about fraud. Judge Wright doesn't seem to agree. Being the judge, his opinion is likely to carry a bit more weight.

It appears to me that Prenda was doomed in those states that allow for a bond the second they refused to post a bond. This was a major signal that Prenda could not afford their business model if a sufficient number of cases reached that stage. And of course word would have gotten out thanks to the Internet.

I also went back and read the tweets from the "Bull". If it was indeed Mr. Steele, I am amazed at the bravado now that we have an idea of what was behind the curtain.

One question I have had with this case is whether Prenda could have avoided all of this by arranging their affairs differently. As a hypothetical . . . Suppose that I (not an attorney) located several women of easy virtue and produced cinematic masterpiece involving lots of naked people. Then I made bona fide, but feeble, attempts to market the product publicly while suspecting (knowing?) it would get shared via bit torrent.

Now comes my old high school chum who happens to be an IP attorney. I engage him to sue the downloaders and we manage to divide the spoils either through legal fees negotiated with a "wink wink nudge nudge" arrangement, explicit contingency fees, or some other friendly arrangement that does not rise to the level of champerty.

That would be equally sleazy copyright trolling but wouldn't it avoid all the problems that Prenda is facing here? They would have a legitimate client and would be making boatloads of fees for extracting settlements, so are they just being incredibly stupid?

I like this Cathy also. Thanks for the write up. This was great. Requiring the undertaking was a smart move by Navasca's council but considering the pace of the current Prenda implosion, I'm beginning to wonder if they'll ever be able to make good on it.

@James: I think this has been raised before on these boards and the assertion was made that what Prenda et al were up to would have been legal (slimy, but legal) if they had not hidden their presumed ownership in the entities that owned the copyrights. In particular, their alleged use of Alan Coopers name without his consent particularly tripped them up.

IAMAL, but there seems to be little to keep them from doing this all again with different companies and different porn titles other than the issue of finding defendants via IP addresses which (hopefully) will be extinguished soon.

I mean, since in some class action work where Paul H apparently used his father and his wife as plaintiffs, he could easily have done so in these cases.

Of course, who wants it to be known that your wife or your father own copyrights to pornography…? I presume that was the point of this 'who owns what' shell game they have been playing.

If anyone with a better understanding of the law (and this includes nearly everyone except my dog, and she's been studying!) wants to correct me, I would appreciate the education.

Thank you Patrick and Dan. That helps my understanding the strategy of insisting they plead the 5th in a criminal proceeding rather than in a civil matter. Judge Wright, and everyone in the world for that matter know perfectly well what these guys are up to.

On a side note, the shell company game question came up in another blog with respect to it being a rather a new phenomenon in the courts. Not true. Dead beat parents have been cheating child support orders exactly this way for many years. The probate courts are still easily swayed by this game and it still works unless there are aggressive lawyers to push the issues. The tried and true outcome here is whoever has the most money wins. Merit is much less a factor.

One question I have had with this case is whether Prenda could have avoided all of this by arranging their affairs differently.
@James
They could have but I suspect greed and hubris charted their course.

If only Duffy's first name could have been Wynn, that would have just been too appropriate!

Orvis Barfley, I'm not sure that a horse is the best metaphorical runaway item. I rather think that it's one of Wile E. Coyote's runaway falling anvils. Prenda is now fighting over whether to be riding the anvil to the desert floor as opposed to being underneath it, waiting for it to hit.

If he didn't show, or if he took the Fifth, it would have been Game Over here in San Francisco: there would be an open invitation for a motion to dismiss with prejudice and a motion for an award of fees, payable jointly and severally by AF Holdings, Prenda Law, and probably Duffy personally.

Instead, I think the hope is to keep up the story that AF Holdings is independent so that any award of fees is only payable by AF Holdings or, at worst, AF Holdings & Prenda Law.

So far better to stick to a consistent story and say nothing new. Since everything is being shared by all Prenda defendants, all that matters is not adding anything new to the record. But repeating old stuff is fine, as long as he is consistent.

So he stuck with the "Salt Marsh" trust story rather than the "Lightspeed LLC" story, and otherwise stick with the Sgt Schultz defense present in Hansemeier's deposition.

I also wonder if Duffy, like Gibbs, should be in "Save My License" mode, which pleading the 5th about his client (unlike Ingenuity 13 where Gibbs, not Duffy is the attorney of record) would be a just about guaranteed bar license killer.

Prenda and Duffy are a relatively late player to the game, and it wouldn't surprise me if the sale of Steele & Hansemeier to Prenda included some profit sharing or similar clauses that keep a bulk of the money going back to Steele and Hansemeier. (No sale sales, like, eg, buying only the right to sue, does seem a popular tactic amongst some lawyers.)

So unlike the Steele and Hansemeier, Duffy may not have made enough to retire already.

mcinsand, i like your analogy, too, but if you've ever been on a runaway horse (crossing a state highway, mind you) you'll know what sinking feeling that is. at that point, you're just there for the ride. hang on and hope for the best.

I respond, "No, I killed Jimmy Hoffa, but they've never caught me, the stupid bumblers. I committed the perfect murder!"I respond, "No, I killed Jimmy Hoffa, but they've never caught me, the stupid bumblers. I committed the perfect murder!"

@Nobody – Prenda had a way of trying the same thing over and over hoping for a new result. After it was made nearly crystal clear that no court would entertain damages for negligence for not securing a router (I mean other than there is no portion of the Copyright Act offering those kinds of damages) they kept the claim in their filings and in the lovely letters in which they sent to people hoping to have large sums of money given to them for not attaching that persons name to a porn title in a Google search.

Yes, I just made a quick post featuring the hilarity. I avoided any analysis in order not to ridicule myself in anticipation of Ken's post. Also, there are many tasty tidbits that I did not mention (like "EFF tempering [sic] witnesses").

So Lutz created a non-beneficiary trust with his children as the beneficiaries the trust doesn't have. Children which don't exist. And named the trust for his non-existent children after the boyfriend of the sister of a friend.

"So Lutz created a non-beneficiary trust with his children as the beneficiaries the trust doesn't have. Children which don't exist. And named the trust for his non-existent children after the boyfriend of the sister of a friend."

More or less. Then in his position as total owner of the trust he decided to have John Steele's crazy housekeeper be the CEO. And then–somehow–nobody really knew who controlled the trust or who the CEO was to answer clear and direct questions about them in court and at depositions. And nobody really is sure what happens to the settlement money that goes to the trust with the non-defined, yet defined, but also not-currently-existing beneficiaries except pay for the legal fees in the law firm Lutz works for.

[…] When we last left our heroes Paul Duffy had managed to appear in open court and yet somehow seemingly not directly inculpate himself in Prenda Law's affairs, at least no more than he had done so previously. He was there because Prenda Law is now running for the exits, seeking to dismiss AF Holdings' case against defendant Joe Navasca "without prejudice" — meaning, with the option to re-file. In this particular case it needed the court's permission to do so. As Judge Chen noted in his devasting-to-Prenda ruling today: […]